Teach them early teach well; He spends, she saves; The lazyman's budget; Why, why, why?; Wave and pay at what cost?

Teach them early teach well; He spends, she saves; The lazyman's budget; Why, why, why?; Wave and pay at what cost?
Snip your debt access

By Amanda Morrall (email)

1) Teach them early, teach them well

In my last blog, I mentioned my dilemma about whether to start giving my children pocket money and how much. I'm loath to part with my cash but have been convinced that it's probably not a bad thing provided there are some strings attached. We had a little chat and discussed what would be fair payment in exchange for services and chores around the home.

At the end, I priced out some chores in consideration of the labour involved and gave them the choice of whether or not they wanted to make money. For example, vacuuming and cleaning the car is a $2 job. My youngest, age 8, is pretty diligent about feeding the cat so I tagged that at $2 a week as well as composting which is a dirty job. We'll see how hungry they are to make some money.

Here's a few other suggestions and practices from readers that I thought I'd share with you.

We started giving our boys pocket money at age 10..........$1 per year ( as your son suggested), BUT it was in return for chores. Mow the lawn ( we had a ride-on, so they learnt valuable driving skills too), get the washing in, empty the dishwasher. We said, this is your job and you get paid for doing a job, no-one gets paid for doing nothing (  too young to understand about benefit system just yet)   $10 doesn't go far these days, but don't tell your son that just yet.
It does teach them valuable lessons about money and saving. At first they would go up to the dairy and spend the lot  on payday and have to wait a whole week. We weren't mean, we still bought them the usually treats with the weekly grocery shop.
By age 14 both boys were working at the local supermarket, $14 a week was never going to be enough now they were into computer games, and thinking about cars. We refused to buy them PC games as they are just not our thing, so the only way for them to get them was to work for them.......or wait for Grandma's Xmas present.
They are now 23 and 20 and I believe they have sensible money heads, and I'm all for pocket money.

When he turns 10  give him a debit card, you load it with $20 a month.

Probably gets me lambasted in some circles but we pay oldest child a very small weekly sum then triple it for 100% completion of weekly chores, which mostly revolves around her independently getting ready for school and feeding the cat by AM on the dot. Compliance with that makes mum and dad ready on time and happy for the day ahead, so worth the small price! We're fairly relaxed about other things so it teaches a bit of discipline plus the notion of a job well done providing financial reward.

And here's an interesting article on when and how to teach kids about money via smartmoney.com

2) He spends, she saves

It is the rare couple that share the same values and habits when it comes to spending. Stereotypically, it's the gals who spend and the lads who earn and save. Hmmm, not my experience.

In this blog, from budgetsaresexy.com, a faithful saver describes her frustrations with her spend happy partner who doesn't see eye to eye on the importance of fiscal restraint and budgeting. Some great tips offered up from fellow readers in the comment stream.

3) Lazyman's budget

One of the quickest ways to achieve the eye glaze effect is to start talking about budgets with people. Despite the handle of the aforementioned blog (budgetsaresexy.com) most people regard budgeting with as much enthusiasm as a trip to the dentist. To be perfectly honest, I can't say budgets make my pulse race either but I've made my peace with the b-word and I do my best to stick to one. I have found Sorted's  budgeting system to be quite useful in this regard but will be making the leap soon to a more advanced money tracking system that's more in my face. Mentally I know when I've gone over and I'll berate myself for it for weeks but I reckon a red flag alert system (via my mobile phone or internet banking) will shame me into even better habits.

For those who find budgets daunting, here's a piece that simplifies the process to the extreme.

4) Why? Why? Why?

I had a wealthy acquaintance (who could easily retire at the age of 42) confess to me that they couldn't or wouldn't stop working because of the nagging belief they needed to keep stock piling ever increasing amounts of money. I asked why and they were stumped for an answer. 

Here's financial advisor Liz Koh writing on the importance of knowing why you are working for your money.

What is your Why?

Setting your financial goals is not a simply a process of deciding how much money you need. Examples of common financial goals are:

·        To save $5,000 over the next year

·        To save $500,000 for retirement

·        To have a passive income of $50,000 a year

Goals such as these are unlikely to be achieved. That’s because money has no intrinsic value; its value comes from what it is used for. Unless you are clear about what purpose money serves in your life, you will never be motivated to accumulate it. Finding your purpose is simply a matter of asking yourself ‘why’. For example, the reason why you have a goal of $50,000 passive income a year might be ‘to achieve financial independence’ . Now ask yourself why financial independence is important. The answer might be ‘to have financial security’. In turn, the reason why financial security is important may be ‘to provide for my family’. The trick is, to keep asking yourself ‘why’, until such time as your discover what is fundamentally important to you. Ultimately, you may uncover higher level objectives such as pride, satisfaction and personal fulfillment. These are the things that will motivate you to achieve your financial goals.

For most people, lasting satisfaction and fulfillment come not from possessions but from intangibles such as relationships with family and friends, good health, or broadening your life experience through education and travel. When you truly understand what motivates you and what you want to achieve in life, rewrite your financial goals to include how much money you need and why, for example, ‘to achieve financial security and independence through having a passive income of $50,000 a year’. Writing your goals in this way makes them much more meaningful and powerful and more likely to be achieved.

5) Wave and pay

I have an aversion to debt and credit cards. The main reason is they're just too easy too use and to spend money you don't have. That's why I have one of those debit Visa cards. I can only spend what I have. I enjoy this limitation.

Someone must have slipped truth serum in my coffee this morning because here's another confession from Amanda's financial vault:. I do have a "real" credit card from my life in Canada. I use it to book flights and send my mom flowers in Canada. I'm not a rich woman but shockingly, I have a credit limit on that card of CDN$30,000. I never asked for it and to my recollection have never exceeded a $1000 spend. I guess I should be flattered the banks see me as credit worthy but throwing easy (and unwanted) credit at people is just plain wrong.

A colleague informs that he's managed to keep his limit to $2K by repeatedly declining the bank's offer to extend it. I like this approach. Just say No!

While we're on the subject, I'm all for technology but tend to think that making credit even simpler and quicker to use, via this new wave and pay technology, is a recipe for disaster in the hands of many. Admittedly the limits are tiny (under NZ$100) however $20 here, $20 there (at 20% or whatever) adds up.

Although it hasn't had a big uptake yet, lenders and vendors in the U.K. are predicting the wave and pay revolution will begin in London this year when the Olympics get underway.

For other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

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Re your credit card limit: If you have a couple of credit cards maxed out at 19%, then you could use your unused limit on another card to transfer to (at a lower rate).   E.g. Westpac have a 4.95% rate for balance transfers - with no expiry, ie until repaid. 
So someone with 30k of credit card debt could take out a couple of fresh cards, then balance transfer their way to repay the debt on a far lower rate/s.  This of course implies that they have the discipline to not spend up on the unused limits.
At 4.95%, this is lower than a mortgage topup.   (Sounding like a Westpac salesperson!) Other banks also offer low tranfers rates but these low rates expire after 6 months.

Brian's solution on the blog is the one we use. I got sick of not having any money. I only wish I'd done it a hell of a lot sooner. Like 20 years ago.